You should negotiate the best offer on a Foreclosure.
Even though you are not an expert, you should still make an offer on a foreclosure.If you think your offer will be too low, you don't have to offer more than you want to pay.If there are liens or repairs that need to be made, research similar foreclosed houses and adjust your offer.Your offer should be fair if you did your homework.
Step 1: Check out the local sources.
There are different places where you can find foreclosures.Look in the back of the newspaper for the auctions.The auctioneer's website has more information.You can easily search for foreclosed properties on some real estate websites.There is a real estate agent who specializes in foreclosures.
Step 2: Contact financial institutions.
The bank may have foreclosed properties listed on their websites.Search online for the name of the bank and "REO", which stands for real estate owned, to find them.You can look at the properties they own.
Step 3: Go to the house you want.
Foreclosures can seem like great deals, but that doesn't mean they all are.If you buy foreclosures in poor locations, they will decrease in value even more.To find poor locations, look for similar homes nearby and the area itself.The property is not a good buy if many nearby homes are in foreclosure.If the property is not close to amenities or a good school district, you might want to stay away.Look for properties that are in good shape.
Step 4: Financing out-of-pocket costs can be difficult to find.
It is easier to purchase foreclosures in cash.The closing process can be sped up if sellers are more motivated to sell to a cash buyer.Many buyers of foreclosed homes have a mortgage.You can get a mortgage for a foreclosed home the same way you would a regular home purchase.Adding in the costs of repairs, renovations, and closings will help determine how much to set aside or borrow.
Step 5: Predict the future sales price.
Take a look at recent sales in the neighborhood.The range of average square foot price received and the target home square price can be calculated.The range for a home with 1500 square feet is $225,000 to $277,500.There would be a median sales price.
Step 6: It is possible to calculate estimated costs.
Repairs, sales commission, closing costs, and interest are included in the estimate costs.10 to 20 percent of the purchase price is additional repair costs.There will be a 6 percent sales commission and 2 to 5 percent closing costs.A purchaser of a foreclosed home for $150,000 would likely have between 18 and 31 percent of the sales price in costs.A buyer will usually pay this out of pocket.If you see obvious flaws from a distance, such as poor landscaping, a damaged driveway, and/or a roof in need of repair, then you can expect that more repair will be required in areas that you don't see.You can add these costs to your estimate.Add the additional costs to the 10 to 20 percent cushion you already have.Add $5,000 to your earlier estimate for roof repairs.
Step 7: Take the target profit and calculate it.
You can use either a dollar figure or percentage.You can use your average cost to calculate a percentage.By how much you want your percentage return to be.A pre-tax profit estimate of 30 percent on your average out-of-pocket costs would be $11,025.
Step 8: The range of probable costs is calculated.
To calculate the range, add the estimated costs to the targeted profit.
Step 9: Determine initial offer range
If you want to make a profit, subtract your expected costs from the average sales price.If the probable sales price is $251,250 and the range of costs is $38,025 to $57,525, your initial offer should be between $193,725 and $213,225.
Step 10: Contact the person who is in charge.
The homeowner may have months after the NOD is issued to pay back their default or sell the home in a short sale.If the property is still facing foreclosure, the Trustee or Attorney will be able to tell you about it.It is pointless trying to make an offer on a home that is no longer available.The name and contact information of the attorney should be on the NOD.
Step 11: Ask the homeowner.
You may want to send a postcard to express your interest in the property if the homeowner has not already listed it as a short sale.Remember to be sensitive to the situation of the homeowner and not mention the foreclosure in the postcard.If you would prefer to contact the owner directly, you may want to hire a real estate agent.A short sale is when the homeowner sells the property for less than they owe on the mortgage.It can take months for the sale to be approved by the bank that holds the note.A good example of a non-hostile postcard is one that says "I'm interested in buying your property."I would love to have a closer look at it and make you a better offer.You can reach out to me at your convenience.XXX-XXXX.You can get a better idea of the repairs needed if the homeowner allows you on the property.It will give you an idea of what you should offer.
Step 12: Make a proposal.
If the homeowner is interested in selling the home to you as a short sale, it is time to negotiate payment.Offer at the low end of the range with a closing contingency.If you can, you should get a title search and hire a contractor to look over the house.For the first couple of months after the sale, you can let the homeowner continue living in the home as a renter.Remember, you don't want to seem desperate when you're negotiating with anyone about anything, so you can offer to pay housing costs for the first couple of months after the owner finds a new home.The other party will use weakness on your part as leverage.Don't look disinterested and stay cool.You come across as someone who's volunteering to help the homeowner when you talk about your offer.Hire a third-party to negotiate for you if you can't do it on your own.You should make a good faith deposit to confirm the seriousness of the offer.Deposit can be made contingent upon closing.You want to make sure that the house is taken off the market before you buy it.
Step 13: There is an auction process.
If you attend a foreclosure auction as a spectator, you can get an idea of what it's like.Be aware of similar foreclosures and what people are bidding for them.This can help you figure out how much you should give.You can use the internet to find foreclosures that will be on the auction block.
Step 14: You can contact the seller in the listing.
The homeowner may be able to pay off the default within five business days.In short notice, foreclosures can be postponed or terminated.To find out if the listing is still current, you need to speak to the attorney.During this time, ask as much as you can about the property.Ask how much maintenance is needed on the property.How long has it been empty?More maintenance might be required on properties that have been empty for a while.Ask why there isn't any demand for the property if it's been on the market for a while.
Step 15: The property should be researched.
If you want to find liens or debts on the property, you should run a title search and hire professionals to give you an estimate.Due to the fast-paced nature of the auctions, you may not have time to do all of that before the sale.Find out as much as you can about the property and keep it in mind when making your bid.
Step 16: Have your maximum bid ready to go.
It is easy to get caught up in fast-paced auctions and make bids for more than you want.Compare your figures from other foreclosure auctions and repair and debt estimates.Don't bid higher if someone outbids you.You will learn the hard way that it isn't worth it.
Step 17: Call the lender.
A real-estate owned (REO) or bank-owned property is real estate that's owned by the bank that held the mortgage.You can find out the name and address of the bank that owns the property if you don't have access to the REO listing.If you want to see the bank's REO listings, you may have to make a direct request.Wells Fargo allows you to search for properties that are owned by the company.
Step 18: A real estate agent can be hired.
Banks and lenders are less willing to work with inexperienced buyers.If this is your first time buying a foreclosed home, having a real estate agent represent you can increase your chances.
Step 19: You should inspect the home.
You will want to know the title condition and have the property professionally assessed during the foreclosure process.When making an offer, you should subtract the cost of repairs from the total.
Step 20: Make an offer.
It is similar to making an offer on a short sale.The homeowner is not involved.It is easy to think that getting a good deal is impossible without a stressed and desperate homeowner.
Step 21: You don't want to negotiate like you are working with a homeowner.
Lower closing costs and quick closings are not going to be attractive to banks.When buying REO properties, you're going to be negotiating almost exclusively on price.
Step 22: Don't let impatience get in the way of exercising patience.
At first, your offer might not be accepted.As the property remains unsold, banks will often voluntarily lower the price.It's a good idea to keep in touch with your contact at the bank so they can keep an eye on the property.You can buy it a few months down the road for the price you want.
Step 23: A competitive bid is what you should offer.
There are other people looking for REO properties.Other people are likely to look at that piece of real estate.Your bid should be competitive.You will be passed up for someone who offered more money.